Job gains will remain weak for several more years because of all the wealth that U.S. households lost after 2008, Minneapolis Federal Reserve Bank President Narayana Kocherlakota said Tuesday.

Besides cutbacks in consumer spending that lowered demand for workers, the loss of wealth meant less startup capital to launch the small businesses that have created jobs coming out of previous recessions, he said at a press conference.

Still, Kocherlakota expects the modest economic recovery to continue, predicting gross domestic product (GDP) growth of 2.5 percent to 3 percent in each of the next two years. That’s a slight pickup from 2011’s 1.6 percent gain.

He also predicted U.S. unemployment would decline from its current 8.3 percent rate to 7.7 percent at the end of 2012 and 7 percent at the end of 2013.

But he pointed to employment trends in the last four years that demonstrate the weakness of the recovery. Although the U.S economy has gained 2.5 million jobs during the last two years, those new jobs don’t come close to replacing the 8 million jobs lost after the financial crash of 2008.

Even though the nation’s gross domestic product has returned to its pre-recession level, he said, it’s still 10 percent below the level it would have reached at its historic pace.

“The national economy has recovered at a disappointingly moderate rate,” he said.

One factor was the depth of the housing and stock market declines, which erased substantial amounts of household wealth.

“You don’t feel like going out and spending in that situation,” he said, explaining that without that demand from consumers, employers won’t hire.

But the wealth loss also chilled small-business startups, which created new jobs coming out of previous recessions. Entrepreneurs don’t have collateral in their homes or the savings to help them finance a new business, he said. “That’s another source of jobs lost.”

Kocherlakota warned that structural issues, such as the mismatch of available jobs and the skills of the unemployed, could keep jobless numbers elevated for years.

Five years ago, 62.7 percent of the nation’s population older than age 16 had jobs, but that share has declined to 58.5 percent now. “I don’t think we’ll get back to the 2007 level,” he said.

Minnesota’s GDP and employment picture continue to outperform the nation as a whole. The GDP in the state surpassed 2007 levels, while the nation still fell short of that level. He pointed to a better educated workforce as a key factor in the state’s relative resilience.

Kocherlakota was appointed president of the Minneapolis Fed in 2009 and has gained a reputation in as an outspoken economist, sparring in the last year with other Fed leaders about the bank’s long-term commitment to low interest rates.

The goal of that “accommodative” policy, as Kocherlakota describes it, is to reduce the ranks of the long-term unemployed and bring discouraged workers back into the workforce.

But if that policy allows inflation to rise above the Fed’s 2 percent target, he warned, the recovery could be thwarted by eroding business and investor confidence in the Fed’s inflation controls.

“Keeping that trust will be more effective in stimulating employment and demand” in the long run, he said.